In the second of our in-house focused articles, Laila Martin considers the commercial drivers for a business to grow its in-house legal team and discusses some of the benefits of having this dedicated resource.

For many lawyers, working in-house is currently “the place to be”. In her previous Opinion article, Laila looked at what is drawing lawyers to make a move out of professional services and into industry and here, she explores why industry is so keen to bolster its internal legal support.

In-house legal functions in the UK really started to develop in the 1990s, and at that time, legal teams were primarily seen as the conduit between the business and external law firms. Their primary role was to manage and oversee the legal work conducted by these external advisors. Many clients initially built their legal teams by hiring “generalist lawyers”, who had a broad range of skills.

Now, more than ever before, we see clients hiring more specialist lawyers. This includes increased recruitment requirements from our clients in areas such as litigation, employment, competition and anti-bribery/anti-corruption, alongside their product specialists and generalists. The reasoning being to build a legal function that can service all areas of their business, on any legal issue, thus reducing their external legal expenditure. As a result, some in-house functions have now developed to such an extent that they could rival a full service city law firm.

What are the benefits of building out the in-house legal function in this way?

Cost saving

With the economic downturn, corporates have been forced to reassess their overall costs and external legal expenditure can often take up a material percentage of this. Institutions large and small have, through cost/benefit analysis, realised that building a comprehensive legal function in-house can, in the long-term, be more financially beneficial than relying on external providers. By building this function our clients are able to keep much of the day to day work in-house.

Our clients are seeing increased flexibility on fees from their external law firms but this is generally for work that has to be outsourced. The evolution of in-house functions signifies that some businesses now only have to look to outsource legal support when the work is i) too large (such as large-scale M&A, litigation/arbitration or investigations); or ii) based in a jurisdiction where the internal legal team has no experience and/or physical presence. However, even in these instances, SSQ have been able to assist in-house teams by:

1.Providing clients with lawyers on an interim and contract basis. These lawyers are able to hit the ground running and clients are able to better control their legal expenditure without committing to an increase in permanent staffing levels. This is perfect at times of increased workload or when specialist skills are required.

2.Assisting in the recruitment of lawyers in jurisdictions where there has been an increase in business activity and therefore in legal support requirements. This is often a strategic decentralisation of the legal function from corporate headquarters.

We have also seen that, with capable and dedicated in-house legal teams, particularly those with strong litigation experience and thus established relationships with chambers, our clients are now able to instruct barristers directly and further contain costs. And when instructing external law firms, an experienced in-house litigator can project manage major tasks, such as disclosure, thus hopefully lowering external costs further.

Greater commercial understanding

One of the frustrations businesses have of any external supplier is that they don’t understand the specific commercial drivers of their business or how the business operates, so there is always something of a disconnect between the two.

External counsel are often parachuted in and then out of a certain transaction/dispute and therefore cannot fully immerse themselves in the business or fully understand the commercial motivations for each discrete piece of work.

Once a business has a dedicated in-house lawyer or legal team, whose allegiances lie fully with a sole client (their employer), that lawyer can begin to make decisions better aligned to the overall strategy. The in-house counsel then becomes a true “trusted advisor” and the business is therefore safe in the knowledge that their in-house lawyer understands the internal risk appetite and the direction the company would like to move in.

Speed/time efficiency

An in-house legal advisor is dedicated to supporting their business and their advice and guidance is far more accessible. The in-house legal team will have invariably developed a deep understanding of the business (as discussed above); therefore with this higher base level of understanding as compared to external counsel, legal advice can normally be prepared and transacted faster. Should work need to be outsourced, the in-house lawyer, as part of their remit, will have developed and nurtured relationships with external counsel so can gain access to them and explain what is needed more efficiently.

Access to talent

Never before have so many UK private practice lawyers been interested in moving in-house, giving businesses more access than ever to lawyers, at all levels; from newly qualified to equity partner. Lawyers are continually reassessing their careers and positions within law firms; junior lawyers do not see the same career prospects within a law firm as in previous decades, while for many senior lawyers, achieving and maintaining an equity partner position has lost its shine. The attraction for clients in hiring a partner is often their multi-client and multi-sector exposure, which can bring new, diverse ideas to a business.

These are just some of the reasons why many of our clients have continued to build out their legal teams. The long term cost saving is evident; however, having a dedicated legal function goes much further. These teams become an integral part of the business and become crucial to the daily running as well as the overall strategy. Through an in-house team a business has direct access to their own “trusted advisor”.

If you would like to know more about how an in-house team could benefit your business or you are ready to expand your legal team further then please get in touch with Laila Martin on +44 (0)20 7187 7436 or laila.martin@ssq.com